ARC 4687C
EDUCATION DEPARTMENT[281]
Notice of Intended Action
Proposing rule making related to financial management of categorical funding and providing an opportunity for public comment
The State Board of Education hereby proposes to amend Chapter 98, “Financial Management of Categorical Funding,” Iowa Administrative Code.
Legal Authority for Rule Making
This rule making is proposed under the authority provided in Iowa Code section 256.7(5).
State or Federal Law Implemented
This rule making implements, in whole or in part, Iowa Code chapters 283A, 298A, 423E and 423F and 2019 Iowa Acts, chapter 166 [House File 546].
Purpose and Summary
Chapter 98 outlines the financial management of categorical funding.
Item 1 is a nonsubstantive reference cleanup.
Item 2 reflects legislative changes brought about during the 2019 Legislative Session, which include additional stipulations for use of tax revenues generated through the statewide sales and services tax for school infrastructure (secure an advanced vision for education fund). The proposed amendments also remove references to the former local option sales and services tax.
Item 3 clarifies that operating transfers from the school nutrition fund are allowed to claim indirect costs.
Fiscal Impact
This rule making has no fiscal impact to the State of Iowa.
Jobs Impact
After analysis and review of this rule making, no impact on jobs has been found.
Waivers
An agencywide waiver provision is provided in 281—Chapter 4.
Public Comment
Any interested person may submit written or oral comments concerning this proposed rule making. Written or oral comments in response to this rule making must be received by the Department no later than 4:30 p.m.	on October 29, 2019. Comments should be directed to:

Nicole Proesch
Department of Education
Grimes State Office Building, Second Floor
Des Moines, Iowa 50319-0146
Phone: 515.281.8661
Email: nicole.proesch@iowa.gov	
Public Hearing
A public hearing at which persons may present their views orally or in writing will be held as follows:

October 29, 2019
3 to 4 p.m.	State Board Room, Second Floor
Grimes State Office Building
East 14th Street and Grand Avenue
Des Moines, Iowa	
Persons who wish to make oral comments at the public hearing may be asked to state their names for the record and to confine their remarks to the subject of this proposed rule making.
Any persons who intend to attend the public hearing and have special requirements, such as those related to hearing or mobility impairments, should contact the Department and advise of specific needs by calling 515.281.5295.
Review by Administrative Rules Review Committee
The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rule making by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rule making at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6).
The following rule-making actions are proposed:
	Item 1. Amend rule 281—98.21(257), introductory paragraph, as follows:
281—98.21(257) At-risk program, alternative program or alternative school, and potential or returning dropout prevention program—modified supplemental amount. A modified supplemental amount is available through a school district-initiated request to the school budget review committee pursuant to Iowa Code sections 257.38, 257.39, 257.40, and through 257.41. This amount must account for no more than 75 percent of the school district’s total at-risk program, alternative program or alternative school, and potential or returning dropout budget. The school district must also provide a local match from the school district’s regular program district cost, and the local match portion must be a minimum of 25 percent of the total program budget. In addition, school districts may receive donations and grants, and the school district may contribute more local school district resources toward the program. The 75 percent portion, local match, previous year carryforward, amounts designated from the flexibility account as described in rule 281—98.27(257,298A), and all donations and grants shall be accounted for as categorical funding.
	Item 2. Amend rule 281—98.69(76,273,298,298A,423E,423F) as follows:
281—98.69(76,273,298,298A,423E,423F) Capital projects fund. Capital projects funds are used to account for financial resources to acquire or construct major capital facilities and to account for revenues from the previous local option sales and services tax for school infrastructure and the current state sales and services tax for school infrastructure. Boards of directors of school districts are authorized to establish more than one capital projects fund as necessary.
	98.69(1)  No change.
	98.69(2) Appropriate uses of the capital projects fund.
	a. 	Appropriate expenditures in a capital projects fund, excluding state/local option sales and services tax for school infrastructure fund, include the following:
	(1)	Purchasing, constructing, furnishing, equipping, reconstructing, repairing, improving, or remodeling a schoolhouse or schoolhouses and additions thereto, gymnasium, stadium, field house, school bus garage, or teachers’ or superintendents’ home(s).  Prior to approving the use of revenues for an athletic facility infrastructure project within the scope of the school district’s approved revenue purpose statement, the board of directors shall adopt a resolution setting forth the proposal for the athletic facility infrastructure project and hold an additional public hearing on the issue of construction of the athletic facility as stipulated in Iowa Code section 423F.3(6A) as enacted by 2019 Iowa Acts, chapter 166, section 16.
	(2) to (4) No change.
	(5)	School safety and security infrastructure listed in Iowa Code section 423F.3(6) as amended by 2019 Iowa Acts, chapter 166, section 15.
	b. 	Appropriate expenditures in the state/local option sales and services tax for the school infrastructure capital projects fund shall be expended in accordance with a valid revenue purpose statement if a valid revenue purpose statement exists; otherwise, appropriate expenditures include the following in order:
	(1) to (7) No change.
	(8)	School safety and security infrastructure listed in Iowa Code section 423F.3(6) as amended by 2019 Iowa Acts, chapter 166, section 15.
	98.69(3) Inappropriate uses of the capital projects fund. Inappropriate expenditures in a capital projects fund include any expenditure not expressly authorized in the Iowa Code. Additionally, expenditures from the state/local options state sales and services tax supplemental school infrastructure amount for new construction or for payments for bonds issued for new construction in any district that has a certified enrollment of fewer than 250 pupils in the district or a certified enrollment of fewer than 100 pupils in the high school without a certificate of need issued by the department of education. This restriction does not apply to payment of outstanding general obligation bonded indebtedness issued pursuant to Iowa Code section 296.1 before April 1, 2003. This restriction also does not apply to costs to repair school buildings; purchase of equipment, technology or transportation equipment authorized under Iowa Code section 298.3; or for construction necessary to comply with the federal Americans With Disabilities Act. Expenditures from the state/local options sales and services tax revenues have the same restriction as expenditures from the supplemental school infrastructure amount, excluding the restriction on payments for bonds issued for new construction.
	Item 3. Amend paragraph 98.74(3)“b” as follows:
	b. 	Operating transfers to any other fund other than to claim indirect costs.